Posts in Trade Secrets

While many see intellectual property merely as a shield, its greater power rests in its strategic use to spark innovation and propel business growth. In this article I describe a systematic approach for developing IP strategies that are tailored to the technology and objectives of each business, so that the resulting IP can be used to drive the achievement of those goals.

Artificial Intelligence (AI) stands at the forefront of innovation, transforming industries and shaping the future of global economies. Although AI innovators understand the value of intellectual property (IP) protection for their innovations, they often don’t know how to secure the right kind of IP protection for their innovations. Employing a process for systematically mining AI innovations to create a map of those innovations is one option for identifying the most suitable form(s) of IP protection to obtain, based on the innovation and the business model within which that innovation will be commercially deployed.

Maintaining control over trade secrets is mostly about risk management, and one dimension of risk lies in having to tell hundreds or thousands of employees to keep quiet and then depend on each of them to do so. Human nature being what it is, risk increases quite a bit when the secret is about something really big and important. And it increases even more if the secret shows that your employer is lying to the public. Indeed, you might think that kind of information is the very hardest to keep under wraps. But there seems to be a growing number of people who think it’s quite easy.

Innovation continues across industries at a rapid pace. Many companies maintain highly valuable trade secrets and private data that provide them with a competitive market advantage. The rapidly evolving technological landscape, however, leads to new and more sophisticated threats to a company’s trade secrets and other private information. Whether organizations are equipped to confront this challenge is an open question.  

The intellectual property regime of the International Trade Commission (ITC) made mainstream news this year with its ban on Apple Watch importation and sales in the dispute between Masimo Corporation and Apple. While that dispute is ongoing and the subject of much coverage already, here are five other key IP cases with a variety of important rulings for parties at the ITC—particularly some outside of the typically patent-centric docket.

Being able to quantify risk probabilities for a trade secret helps owners make strategic decisions in intellectual property management, such as choosing the type of intellectual property protection, considering opportunities for M&A, licensing, and improving the reliability of protection. As a result, this quantification enables the extraction of more value from intellectual property, particularly when managing middle- and large-sized IP portfolios. Let’s explore one possible approach to quantification by modeling an example case, quantify probabilities for risks derived from both the competitor and owner and its influence on Expected Monetary Value (EMV), and then discover some non-trivial suggestions for improving the efficiency of trade secret management.

In Part I of this article, we recapped some of the most notable trade secret cases of the past year that dealt with issues such as proving secrecy and exercising reasonable efforts, as well as the publication of a key judicial resource for trade secret cases. Below, we continue with some of the top trade secret cases and subject matter the courts addressed in 2023.  

Trade secrets in the United States have a fascinating history, during which courts shaped the common law tort as a way to enforce confidential relationships. Now the legal framework is statutory, with some version of the Uniform Trade Secrets Act (UTSA) in effect in every state except New York, and with uniformity in the federal system thanks to the Defend Trade Secrets Act of 2016 (DTSA). Nevertheless, the law continues to evolve much as it did a century ago—that is, through the opinions of judges deciding individual cases on their facts. What follows is a selection of those decisions, along with other resources, which have come out during the past year and which I believe provide helpful guideposts about important aspects of trade secret law and practice.

In a laudable effort to curtail rampant corporate IP theft, a bipartisan group of U.S. Senators has called on a hesitant Department of Justice (DOJ) to step up its enforcement. As reported in Forbes, Senators Thom Tillis (R-NC), Chris Coons (D-DE), and Marsha Blackburn (R-TN) recently issued a letter to the DOJ identifying the core gap in its prosecution habits. Their primary complaint was “the DOJ’s focus on individual, as opposed to corporate, offenders.” This is an oversight that must be corrected. 

Today, the Center for Intellectual Property Understanding (CIPU) released the results of a survey on viewpoints within the intellectual property (IP) community about acceptable behaviors surrounding IP rights, as well as guiding IP principles for business and consumers. Responses from inventors, attorneys and consultants across the IP sector revealed a significant disparity in beliefs on how IP protections impact sharing and the effects of IP infringement, though most agreed that IP has positive economic impacts in general.

Tightening your grip on a company’s trade secrets can actually lead to losing them. Stay with me here; this kind of excessive protection is more widespread than you might think, and most companies don’t appreciate the risks that they are taking by overdoing it. The first category is legal risk. Recall that courts require, as part of any case for misappropriation of trade secrets, that you prove you have taken “reasonable measures” to maintain control over the information. Because most trade secret loss happens through employees, you might assume that judges want you to have strong confidentiality agreements. And you would be right; in fact, if you don’t have them, you are statistically likely to lose. But here’s the hidden problem: if your employee non-disclosure agreements (NDAs) are too broad, courts could throw them out.

Generative AI (“Gen AI”) is everywhere, with all sorts of promises about how it can help the world. Let’s say a company has created new confidential methods for cancer treatments, but they are not really effective. They ask a Gen AI to come up with a cure for cancer using these new methods.  The gen-AI (using the billions of words and images available to it beyond human comprehension) conceives of the cure, and it works, saving many lives. [Note: Generative AI (“Gen AI”) as used herein will refer to deep-learning models that can generate high-quality text, images or other content based on the billions of pieces of data they were trained on].

On November 20, the U.S. Supreme Court denied a petition for writ of certiorari filed in Tata Consultancy Services Ltd. v. Epic Systems Corp. The denial leaves in place an appellate court decision awarding $280 million for unjust enrichment and punitive damages in a trade secret misappropriation case where the plaintiff suffered no economic harm and the defendant gained no actual benefit from the misappropriated information.

On November 13, global investment banking firm BTIG filed a lawsuit  in California state court against rival company StoneX Group, alleging trade secret and breach of contract claims related to a StoneX’s recruitment of several key BTIG employees in order to gain access to valuable proprietary software code developed at BTIG. BTIG’s suit seeks disgorged profits of $200 million as well as remuneration for StoneX’s unjust enrichment, which BTIG estimates could reach over $1 billion.